In a 5-page essay use extended definition and classification to analyze Predictably Irrational. Develop a thesis that defines the term "predictably irrational" by breaking it down into 4 or 5 categories (your mapping components) that you will illustrate with examples that ARE NOT IN THE BOOK.
Paragraph One: Introduction
Paragraph Two: Thesis with 4 or 5 mapping components
Paragraphs Three-Nine: Illustrate and elaborate your mapping components
Paragraph 10: Conclusion, a restatement of your thesis
Last page: Works Cited page with no fewer than 3 sources
Part Two. (Chapters 1-3)
One. What’s the book’s purpose? To identify hidden purposes behind our actions and in doing so rethink what makes us tick. More specifically, why even intelligent, well-meaning people make intelligent mistakes like the nurses who were convinced that ripping off bandages was preferable to slowly taking them off.
To look at these mistakes, we must look at the mind’s capacity for irrationality and what forces make even the best brains irrational. The question is if we identify these irrational forces, will we be able to free ourselves from them or at the very least minimize their control over us? Or are we hard-wired to be irrational and no degree of intellectualizing our condition can improve it?
Two. How do marketers use decoys to motivate consumers to spend more money? See Economist example. Marketers use the “truth about relativity,” namely, that we are irrational beasts compelled to always compare our choices.
By giving us false choices, we are often fooled by decoys into giving more value, or less value, to something by the way consumer items are juxtaposed with others. You might, for example, think you got a "deal" going to a UC school, which will cost you "only" 50K for two years instead of going to a private school, which will cost you 90K for the same period.
A decoy is anything extreme that makes the desired choice seem better. A stupid price on a magazine subscription that is the same as the magazine and Internet subscription makes the latter seem cheaper.
Another example:
My wife and I have twin girls, born in 2010, and it’s really hard, but I have a friend whose second daughter is severely autistic. When I see what my friend goes through, I feel like my parenting duties are relatively easy.
Marketers use this same psychology when they price their items, trying to make you feel that a price is a “good deal” by putting it next to higher prices or “decoy deals.” Or you’ll notice “retail price” is artificially jacked up and the “sale price” seems really low when in fact it is high. I for example bought a “$1,300” watch for “only” for $257.
Three. Decoys draw us to their more similar comparisons. See the colonial house example on page 8. He calls this comparison, A, A-, B, or The Decoy Effect. Of the three, we will choose A. See page 9. Let’s say you’re looking for a good English 1C teacher. You hear McMahon, a male, is good, but you also hear that Miss Carbo, a woman, is bad. Another woman, Miss Seavers, is mentioned who is supposed to be as good as McMahon. According to the Decoy Effect, of the three teachers you’ll register to take Miss Seavers.
Another example: If you’re an average looking guy and you want to meet the ladies, bring an ugly version of yourself to the club. Suddenly, you will rise in real estate.
Another example: If we go to our 20-year high school reunion and we’ve gained 20 pounds but find that all our buddies have gained 50 pounds, we feel like a trim muscle man.
Four. What is the fallacy of supply and demand?
See Chapter 2. Make the common thing appear to be scarce like black pearls by inflating the price. Volvo had the same problem. No one bought their cars as a luxury brand until Volvo increased their prices.
Five. Arbitrary coherence. See page 28. Even though price settings are arbitrary, we are “imprinted” with the first impression as the “right price.” The first price we see is called the “anchor.” Take a 99 Cents store, as an example. The anchor in this case is clearly 99 cents. But if something is priced $1.50 or $4.00 and even though the same thing costs three times as much at Target, we find the item to be too expensive at the 99 Cents store because the anchor is 99 cents.
The anchor “brands” or “identifies” the product as upscale or downscale.
Six. The Cost of Experience. Buying the illusion of “experience.” You go into Starbucks and you spend more and more on coffee that costs ten times more than making it yourself with relative ease, but you’re buying more than coffee in the Starbucks ambience. You’re buying an experience, a lifestyle, and you are joining a tribe that you find is desirable. See page 41. The bottled water industry has relied on the same illusion. See the book Bottled and Sold.
When you buy a Mini Cooper, your are experiencing the joy of increased social status, the association of being educated, hip, and urbane.
Seven. The Principle of Unquestioned Habit. We do things, not because we’ve examined their benefit to us, but because of reflex, impulse, and habit. We did it yesterday, so we do it today, and we will do it tomorrow. Once you establish a habit, you develop rationalizations, however absurd, to justify what might be deemed as misguided or even stupid behavior. See page 46.
Eight. From Chapter 3: How do we pay too much when we pay nothing? We assume, wrongly, that there is no downside in the transaction. See page 60. Amazon uses your irrational psychology to get you to buy more stuff, things you don’t need, by offering “free shipping.” I can get “free medical” from my work but how “free” is it? I have to wait for an operation and die before it’s scheduled. Six feet under, how free am I now?
Some cars give you “free” or zero financing, but you have to pay an inflated price in many cases, more than if you found the car for a cheaper price with a low interest rate.
I have a friend who gets restaurant coupons, including a “free” meal. Not once, has the service or food EVER been good.
Part Three. Lexicon
1. behavioral economics: the science that studies judgment and decision making.
2. Rationality, the human animal is hard-wired for logical and rational thinking, a condition that Dan Ariely disputes.
3. Predictable irrationality: our irrational behavior shows up the same way again and again and again for perpetuity unless we learn to recognize it.
4. Consumer relativity: we cannot be convinced of a “good deal” unless we see how our supposed good deal compares to a worse deal.
5. Relativity Judgment Warp: Having something in common with someone in a sea of people you have NOTHING in common with makes you lower your standards for human comfort in part because you’re lonely. You fool yourself into believing you're compatible with someone on virtue of sharing a tiny commonality.
6. Rarity Principle: To make consumers desire your product, create the illusion of rarity by making it seem hard to find.
7. Imprinting: Like baby geese who follow the first thing they see, perceiving it as their Mother, we accept the first price we see equated with a product. See page 27.
8. Arbitrary coherence: Once we experience imprinting with a product, we use that price for all other products in that category.
9. Mindless centripetal motion: Mindlessly repeating your irrational behavior forever and ever as you become locked in your centripetal journey toward the Road to Irrationality.
10. The Hidden Costs of Zero: Compromising quality to get something free and becoming blinded to better, finer, more rarified products.
Part Four. Class Activity
Write about the manner in which relativity has caused you to compromise your judgment in an important area of your life.
Examples of Relativity
A woman stays in a marriage because her husband only cheats on her once a year while her friends' husbands cheat on them at least twice a week.
A college student hates his accounting major and gladly switches to business, not because he likes business, but because business is not as unbearable as accounting.
You go out to a restauraunt in spite of your diet and are relieved you got the banana split that was only 800 calories since the chocolate mud pie was 2,000. The only way to be consistent in your calorie counting is to get an app for your iPod called Meal Snap.
You put up with your boyfriend who refuses to wear deodorant because your previous boyfriend had chronic bad breath that was so odious you could barely breathe. Musky armpits seem like a better deal that rancid breath.
The $200 a month car insurance bill for your Honda Civic seemed bad until you discovered your friend spends $480 a month to insure his Nissan 370Z.
You feel horrible after spending 24K on a car but then feel a little better when you discover that the average cost of a new car is 31K.
McMahon hates being bald but he's seen other bald men who look SCARY UGLY and he's thankful for his looks, however compromised by his baldness.
McMahon hates being bald but he's seen bald men who look like models and now he's depressed over how ugly he looks.
You thought you got a great deal on your Honda Accord, which you got fully loaded for 24K, two thousand below list price, until your friend says he got the same Accord for 22K. Now you hate your life.
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